A self-reliant projected information criterion for the number of factors. Issue 10 (18th May 2020)

• Record Type: Journal Article
• Authors: Chen, Mingjing
• Is Part Of: Communications in statistics. Volume 49:Issue 10(2020)
• Page Start: 2466
• Page End: 2484
• Publication Date: 2020-05-18
• Subjects: Projected PCA -- factor -- eigen ratio -- growth ratio -- information criterion; Mathematical statistics -- Periodicals; Mathematics; Statistics; 519.2
• DOI: 10.1080/03610926.2019.1576889
• Languages: English
• ISSNs: 0361-0926

Abstract

Abstract: In this article, we propose a new projected PCA to determine the number of factors. We project variables of interest into the space spanned by cross sectional averages of variables. And then we construct the eigenvalue tests and the information criteria to estimate the number of factors. We derive the large sample consistency and conduct finite sample simulations to demonstrate the better performances of our estimators. In order to show the edge of our estimators in real data analysis, we revisit a large house price data set for which the number of factors is hard to select.